Komolafe: The Endangered Bahamian Middle Class
By Arinthia S. Komolafe, DNA Candidate for Killarney
Mar 23, 2017 - 11:55:22 AM
Successive administrations have presided over the annihilation and shrinking of the Bahamian middle class with each new day bringing about more negative reports on actions that threaten this vital segment of our society.
The loss of jobs within our two main industries of tourism and financial services have exacerbated an already vexing issue within The Bahamas. Over the last decade, we have witnessed significant downsizing in both the international and local financial services sector. While these actions have resulted from international initiatives, strategic decisions, restructuring, consolidation and outsourcing of functions within financial institutions, they have also highlighted the lack of a comprehensive plan for this vital pillar of our economy.
The news that four branches of a commercial bank are in the process of being closed evoked much criticism from the populace and impacted communities. According to a recent report by Tribune Business, FINCO has slashed staffing levels by 70% over the past five years as the bank continues to outsource back office functions. There have been similar reports on Scotiabank and CIBC First Caribbean during the same period. The picture is not much better within the international financial services sector based on the number of closures, mergers and consolidation we have seen over the past decade as well.
The view from a macro perspective is even more disturbing as we have seen high sectorial unemployment within the “finance, insurance, real estate and other business service” sector in recent years.
While much could be said about the fairness of the job cuts that have resulted from the decisions made by international financial institutions, it is apparent that a new approach and vision is needed for this vital sector. It is common knowledge that individuals employed within the financial services industry typically earn wages that are much higher than other sectors. Hence, they make up a significant percentage of the Bahamian middle class. It follows therefore that the challenges within this sector has left many professionals unemployed or underemployed thereby further shrinking the middle class. Further, the imposition of Value Added Tax (VAT) albeit necessary to address our national fiscal woes has increased the tax burden on the middle class and further reduced the disposable and discretionary income of this group.
Our economy will not grow at the level that is required as long as the middle class remains under siege and endangered. There is no substitute for empowering Bahamians and Bahamian owned businesses to thrive within and beyond our economy. Rather than focus on international banks that are repatriating earnings and cutting jobs, a deliberate national policy aimed at encouraging the establishment and expansion of Bahamian owned financial institutions should be implemented. We should be working with financial services regulators to implement commensurate policies, standards and requirements that provide for tiered licensing of Bahamian businesses. As a nation, we should commit ourselves to a Financial Services Growth Action Plan (FSGAP) which incorporates responsible tax reform, immigration reform, public sector reform, private pension reform and exchange control relaxation – areas that the Democratic National Alliance (DNA) has addressed in its platform. These modifications are essential if we are to improve the ease of doing business in our country. A DNA government is prepared to make the tough decisions and implement policies that will grow the Bahamian economy and strengthen this vital sector.
The most important role of the Government is to create an environment that enables the private sector to flourish and the middle class to thrive. Regrettably, this has not been the fate of our commonwealth over the past 10 years. Rather, policies implemented have worsened the situation and further weakened the Bahamian private sector to the detriment of employees and customers.
Arinthia S. Komolafe
DNA Candidate for Killarney
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